Institute of Economic Affairs Essays 2015

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Institute of Economic Affairs Essay Competition Entry

“Because of market failure and to prevent inequality, the government should finance and provide all healthcare.” Given this common view, whilst making some reference to methods of providing and financing healthcare in other European countries, discuss whether government finance and provision of healthcare is likely to maximise welfare?

Healthcare is categorised as a merit good as consuming it provides benefits to society and to the individual consumer. For instance, immunisation against a contagious disease gives us protection and results in a private benefit as well as an external one, to those who are protected from catching the disease from those who are inoculated. However, few would want inoculation only to protect others. Therefore, the demand for healthcare will be less than the socially efficient quantity.

Having great advances in new technologies, treatments and drugs improves our health service’s ability to supply, as well as encouraging demand to such an extent that demand substantially exceeds supply. Unfortunately, this creates long waiting lists and therefore a scarcity of beds available for treatment. If we privatised the NHS, it would allow prices to increase to show how much it really costs to supply. But obviously, this would be very controversial and cause immigration rates to drop. This could be seen as a bad thing for some, due to the fact that many are very productive and willing to work for low wages, whilst others would argue that it is a good thing for the British workforce. However, rising costs have forced a re-think on funding.

‘Comprehensive, universal and free, from cradle to grave’ was the stated aim of the NHS when it was established in 1948. But some say that the price of healthcare is far too high to ever be considered sustainable. The NHS is highly labour intensive…...

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